Income Tax Severed Letters - 2005-02-04

Ruling

2004 Ruling 2004-0093511R3 - Retiring Allowance

Unedited CRA Tags
248(1) 56(1) 60(j.1)

Principal Issues: 1) Do the proposed amounts to be paid qualify as retiring allowances as defined in subsection 248(1) of the Act?
2) Are the proposed amounts a reasonable expense under section 67 of the Act?

Position: 1) Yes 2) Yes

Reasons: Complies with applicable provisions of the Income Tax Act and we have given similar rulings.

2004 Ruling 2004-0101131R3 - Shareholder Manager Remuneration

Unedited CRA Tags
67 18(1)(a) 78(4)

Principal Issues: Whether shareholder/manager remuneration paid from the proceeds of the sale of business assets is reasonable

Position: Yes.

Reasons: Other than the fact that the amounts are paid on the sale of business assets, the situation is within the scope of the CRA's policy on the reasonableness of such amounts. Given the facts in this case surrounding the sale of the business assets, the amount of the bonus is reasonable in the circumstances.

2004 Ruling 2004-0101341R3 F - Loss consolidation

Unedited CRA Tags
20(1)(a) 245

Principal Issues: Whether we should accept the loss consolidation arrangement (transfer of depreciable property)?

Position: Yes

Reasons: Previous positions.

2004 Ruling 2004-0103111R3 - Foreign affiliates; indirect payment

Unedited CRA Tags
95(2)(a) 17
Summary Under
Tax Topics - Income Tax Act - Section 113 - Subsection 113(1)
Summary Under
Tax Topics - Income Tax Act - Section 2 - Subsection 2(1)
Summary Under
Tax Topics - Income Tax Act - Section 95 - Subsection 95(1) - Foreign Affiliate
Summary Under
Tax Topics - Income Tax Act - Section 95 - Subsection 95(2) - Paragraph 95(2)(a) - Subparagraph 95(2)(a)(ii) - Clause 95(2)(a)(ii)(B)

Principal Issues: Whether (i) paragraph 95(2)(a) would apply to re-characterize income from property of a foreign affiliate on the basis that it was derived from payments deductible in computing active business income, made by another foreign affiliate of Canco under a lease agreement with a third party? (ii) section 17 would apply?

Position: (i) Yes; (ii) No

Reasons: (i) 'indirectly' in opening words of subparagraph 95(2)(a)(ii); (ii) loan made by foreign affiliate fell into the exception contained in paragraph 17(3)(b).

XXXXXXXXXX 2004-010311

XXXXXXXXXX , 2004

2004 Ruling 2004-0108471R3 - Interest deductibility

Unedited CRA Tags
20(1)(c)(i)

Principal Issues: Minor changes and extension of delay

Position: Granted

Reasons: Minor Changes only

2004 Ruling 2004-0088601R3 - RSU plan wherein units can be converted to DSUs

Unedited CRA Tags
248(1) R.6801(d)
Summary Under
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Salary Deferral Arrangement - Paragraph (k)
addition of conversion right into DSUs before maturity date

Principal Issues: 1. Whether bonus plans under which awards are converted into RSUs and PRSUs, and under which such RSUs and PRSUs can be converted into DSUs, are exempt from the definition of "salary deferral arrangement" by virtue of the definition of this term in subsection 248(1) of the Act?
2. Whether the conversion of RSUs and PRSUs into DSUs results in an income inclusion in the hands of a participant?

Position: 1. Yes.

Reasons: 1. Meets the requirements under paragraph (k) since the amounts are to be paid under the plans within the required timeframe. 2. No amount is received by the participant.

2004 Ruling 2004-0085121R3 - Long Term Disability Payments

Unedited CRA Tags
6(1)(f)

Principal Issues: Are the long-term disability payments received by the taxpayer included in the taxpayer's income for the period when provincial legislation provides that such amounts must be assigned to an insurance company

Position: No.

Reasons: The taxpayer must hold all amounts received as long-term disability payments in trust for the insurance company.

2004 Ruling 2004-0085591R3 - Supplemental Pension Arrangement

Unedited CRA Tags
248(1)

Principal Issues: Is the supplemental pension plan an SDA or an RCA?

Position: No.

Reasons: The plan is an unfunded arrangement to provide pension benefits that are supplementary to the benefits provided under the employer's RPP. While funds may be set aside and invested to pay for benefits under the plan, the funds will remain available to the general creditors of the employer.

Ministerial Correspondence

26 January 2005 Ministerial Correspondence 2004-0107411M4 - Worthless property held in an RRSP

Unedited CRA Tags
4900(12) 146 207.1

Principal Issues: The taxpayer requested clarification on how to remove shares from an RRSP where the shares have declined in value and there is no market value for the shares.

Position: We provided our general comments on how to remove such property from an RRSP. We cannot advise what the fair market might be nor what approximation of that fair market value would be acceptable.

Reasons: The value of a share is a question of fact.

24 January 2005 Ministerial Correspondence 2004-0097081M4 - Qualified investments for an RRSP

Unedited CRA Tags
146(1) 204 4900

Principal Issues: What debts are qualified investments for an RRSP?

Position: Provided a list of the qualified debt investments.

Reasons: Standard listing of debt instruments that are qualified.

21 January 2005 Ministerial Correspondence 2004-0107441M4 - Status Indian Post-Secondary Assistance

Unedited CRA Tags
81(1)(a)

Principal Issues: What is the current CRA position with respect to the taxation of post-secondary education assistance received by a status Indian?

Position: General comments provided.

Reasons: Based on the federal government's position that post-secondary education assistance paid to status Indians is provided as a matter of social policy and not pursuant to a treaty right. Notwithstanding the pending obligation to report post-secondary education assistance on T4A slips, the CRA has agreed to delay the reporting of this assistance paid to status Indians until 2006.

21 January 2005 Ministerial Correspondence 2004-0107521M4 - Status Indian Post-Secondary Assistance

Unedited CRA Tags
81(1)(a)

Principal Issues: What is the current CRA position with respect to the taxation of post-secondary education assistance received by a status Indian?

Position: General comments provided.

Reasons: Based on the federal government's position that post-secondary education assistance paid to status Indians is provided as a matter of social policy and not pursuant to a treaty right. Notwithstanding the pending obligation to report post-secondary education assistance on T4A slips, the CRA has agreed to delay the reporting of this assistance paid to status Indians until 2006.

Technical Interpretation - External

2 February 2005 External T.I. 2005-0112781E5 - Critical Illness Insurance

Unedited CRA Tags
6(1)(a)

Principal Issues: Whether critical illness insurance is sickness insurance under the laws of British Columbia.

Position: Unable to provide an opinion.

Reasons: A determination as to the status of such a critical illness insurance plan under the laws of British Columbia would have to be made by the Deputy Superintendent of Insurance.

1 February 2005 External T.I. 2005-0111311E5 - Taxable Benefits

Unedited CRA Tags
6(1)(a)

Principal Issues: Whether a prize received by an employee is included in income pursuant to paragraph 6(1)(a) of the Act.

Position: In this case, yes.

Reasons: Since the only individuals eligible to win the prize were the employees of the multi-national corporation, the employee received the prize "in respect of" or "by virtue of" his/her employment.

1 February 2005 External T.I. 2005-0112771E5 - Paragraph 60(j.1) Transfer

Unedited CRA Tags
60(j.1)

Principal Issues: When is the additional $1,500 rollover of a retiring allowance available?

Position: In general, the additional $1,500 transfer is available for each year or part year that a taxpayer was employed by the employer prior to 1989 for which the employer's contributions to a RPP or DPSP had not vested in the taxpayer at the time the retiring allowance is paid.

Reasons: Provisions of paragraph 60(j.1) of the Act.

27 January 2005 External T.I. 2004-0107051E5 - step grandchild as beneficiary of a "family" RESP

Unedited CRA Tags
146.1(2)(j) 251(6) 252(1)

Principal Issues: Can a stepchild be added to a family RESP set up by a grandparent?

Position: Yes.

Reasons: In our view, the provisions of subsections 251(6) and 252(1) will, in combination, mean the stepchild of the natural child of a subscriber can be a member of a family plan as described in subsection 146.1(2)(j). Registered Plans Directorate concurred with this position.

27 January 2005 External T.I. 2004-0107461E5 - Indian employment income - Guideline 4

Unedited CRA Tags
81(1)(a)

Principal Issues: Comments requested regarding Guideline 4 - specifically, the meaning of 1) employer is resident on a reserve and 2) Indians who, for the most part, live on reserve

Position: comments provided

27 January 2005 External T.I. 2004-0108921E5 - Housing Benefit - Loss Of Quiet Enjoyment

Unedited CRA Tags
6(1)(a)

Principal Issues: Whether the value of a taxable housing benefit received by student dons at a university could be reduced because the nature of the duties results in a loss of quiet enjoyment?

Position: Yes.

Reasons: Within the scope of the CRA guideline published in the Employers' Guide: Taxable benefits 2003-2004.

27 January 2005 External T.I. 2004-0098171E5 - Health Care Spending Account - Direct payments

Unedited CRA Tags
6(1)(a)(i) 248(1) 118.2(2)

Principal Issues: Whether or not amounts can be paid directly from a health care spending account to the providers of medical services.

Position: Yes.

Reasons: There is no requirement that employees be reimbursed directly for medical expenses under a health care spending account. Amounts can be paid directly from a health care spending account to the providers of the medical services in respect of services provided to the employees.

27 January 2005 External T.I. 2004-0103171E5 - Prior employer pre-reform buy back using RRSP

Unedited CRA Tags
146(16) 8503(3)(e)

Principal Issues: If benefits for pre-reform service under the RPP of a prior employer were commuted and transferred to an RRSP, can the individual transfer those funds from the RRSP to the RPP of his current employer to buy back those years of service?

Position: No

Reasons: Paragraph 8503(3)(e) of the Regulations provides that benefits for pre-reform service must be acceptable to the Minister. IC 72-13R8 sets out what constitutes eligible service for pre-reform years. For vested pre-reform service with a prior employer, only if a reciprocal agreement exists (rare) or if funds are transferred directly from the prior RPP to the current RPP will the service be eligible.

27 January 2005 External T.I. 2004-0105481E5 - subsection 256(9) and paragraph 87(2)(a)

Unedited CRA Tags
256(9) 87(2)(a)

Principal Issues: Whether a corporation has more than one taxation year end as a result of an acquisition of control and amalgamation on the same day.

Position: Question of fact that can only be determined on a case by case basis. However, based on the stated facts there would be only one taxation year end.

Reasons: Wording of the Act and our prior positions.

26 January 2005 External T.I. 2004-0097651E5 - Medical Services as Self-assessed

Unedited CRA Tags
3 9 12(1)(x)

Principal Issues: What are the income tax implications of providing office space, office supplies and secretarial services free of charge to a physician providing medical services in the taxpayer's orthopaedic clinic?

Position: Tax neutral position for income tax purposes. There is no requirement for the Clinic to report an amount in respect of the office space, office supplies and secretarial services provided free of charge to the physician.

Reasons: The Clinic and the physician are dealing at arm's length.

Conference

8 October 2004 APFF Roundtable Q. 6, 2004-0086731C6 F - Connected corporations

Unedited CRA Tags
186(4)

Principal Issues: See below

Position: See below

Reasons: See below

8 October 2004 APFF Roundtable Q. 7, 2004-0086741C6 F - IT-474R Amalgamation Time

Unedited CRA Tags
87(2)(a)

Principal Issues: In the given fact situation, where an amalgamation occurs as part of a same day series of transactions, the articles of amalgamation do not provide the time of day for the amalgamation and one of the predecessor corporations carried out transactions the day of the amalgamation, whether (1) the time of the amalgamation will be the earliest time of the day of the amalgamation as provided in paragraph 9. of IT-474R? and (2) will the predecessor corporation report the transactions it carried out the day of the amalgamation?

Position: (1) No, provided the transactions occur in a logical sequence. (2) The predecessor corporation will report only the transactions it carried out prior to the time the amalgamation actually takes place in the series of transactions.

Reasons: (1) Existing Position. (2) The law, 87(2)(a).

8 October 2004 APFF Roundtable Q. 12, 2004-0086791C6 F - Post June 23, 2004 - Single Purpose Corporation

Unedited CRA Tags
15(1)

Principal Issues: In a situation involving a single purpose corporation (SPC), where the shareholder financed the corporation's purchase cost of the personal use property, whether, after June 23, 2004 (the date the CRA withdrew its administrative position on SPC), the amount of the benefit under 15(1) would be nil based on the Youngman decision (90 DTC 6322)?

Position: It could be nil in a particular situation.

Reasons: CRA's position, in paragraph 11. of IT 432R2, on the application of 15(1) where corporate property is made available for the personal use of a shareholder applies. The benefit under 15(1) would be nil if the amount representing the greater of the cost or the FMV of a luxurious property, where the imputed rent method is used, is the cost of the property, the shareholder made an interest free loan to the corporation as financing of the entire cost of acquiring the property and the shareholder has reimbursed the corporation's operating costs related to the property.

TABLE RONDE SUR LA FISCALITÉ FÉDÉRALE
APFF - CONGRÈS 2004

8 October 2004 APFF Roundtable Q. 13, 2004-0086801C6 F - Increase in PUC when shares are issued to employee

Unedited CRA Tags
89(1)

Principal Issues: See below

Position: See below

Reasons: See below

8 October 2004 APFF Roundtable Q. 17, 2004-0086841C6 F - Amt Paid 84(3) and 80(1) forgiven amt element B(a)

Unedited CRA Tags
84(3) 15(1) 15(1.21) 80(1)

Principal Issues: In the given situation, where a QBIC (a private corporation) and one of its shareholders are dealing at arm's length, a bank loan used by the shareholder to acquire shares of the QBIC is paid to the bank by the QBIC as part of a guaranty agreement (in french "caution"), the shareholder becomes indebted to the QBIC and the shareholder tenders the QBIC shares to the QBIC as payment for its debt owing to the QBIC, whether an amount is paid by the QBIC for the purposes of 84(3) and an amount is paid by the shareholder for the purposes of computing variable B (a) of the definition a "forgiven amount" under 80(1) and the application of 15(1.2)/(1.21) and 15(1)

Position: Yes to both.

Reasons: The shareholder discharges its debt by a payment in kind (the QBIC shares) the value of which is the value of the debt considered paid in full. The value of the consideration given by the QBIC for the the shares is the loan receivable from its shareholder.

TABLE RONDE SUR LA FISCALITÉ FÉDÉRALE
APFF - CONGRÈS 2004

8 October 2004 APFF Roundtable Q. 28, 2004-0086961C6 - Interaction of 55(5)(e)(ii) and 248(25)(a)

Unedited CRA Tags
55(5)(e)(ii) 248(25(a)
Summary Under
Tax Topics - Income Tax Act - Section 248 - Subsection 248(25)
Summary Under
Tax Topics - Income Tax Act - Section 55 - Subsection 55(5) - Paragraph 55(5)(e) - Subparagraph 55(5)(e)(ii)
s. 248(25)(a) does not expand "beneficiary" in s. 55(5)(e)(ii)

Principal Issues: Can 55(5)(e)(ii) be interpreted using the definition of "beneficially interested" under 248(25)?

Position: No.

Reasons: 55(5)(e)(ii) does not refer to the expression "beneficially interested".

TABLE RONDE SUR LA FISCALITÉ FÉDÉRALE
APFF - CONGRÈS 2004

Technical Interpretation - Internal

2 February 2005 Internal T.I. 2005-0113241I7 - Reassessment Beyond the Normal Reassessment Period

Unedited CRA Tags
152(4)(a)(i)
Summary Under
Tax Topics - Income Tax Act - Section 152 - Subsection 152(4) - Paragraph 152(4)(a) - Subparagraph 152(4)(a)(i)
no obligation to file amended return

Principal Issues: whether failure to file an amended return could be considered a misrepresentation

Position: generally no

Reasons: Courts have generally found that misrepresentation must be made at time that return is filed

2 February 2005 Internal T.I. 2005-0111961I7 F - Reassessment of a Partner

Unedited CRA Tags
152(4) 152(1.4) 152(1.7)
Summary Under
Tax Topics - Income Tax Act - Section 152 - Subsection 152(1.4)
CRA can assess a partner directly to change the partnership income allocable to it rather than being required to make a partnership-level determination under s. 152(1.4)

Principal Issues: Whether the Minister may reassess the member ("XCO") of a partnership directly in respect of its allocated share of income of the partnership pursuant to subsection 152(4) of the Act, without making (or if the Minister is unable to make) a determination in respect of the partnership under subsection 152(1.4) of the Act and without making an assessment under subsection 152(1.7) of the Act.

Position: Yes. However, such a reassessment pursuant to subsection 152(4) of the Act could only be made after XCO's normal reassessment period in the situations described in paragraphs 152(4)(a) and (b). Furthermore, such a reassessment under subsection 152(4) concerning XCO would not affect or be binding on the other members of the partnership.

Reasons: Wording of the Act and previous positions.

27 January 2005 Internal T.I. 2004-0103531I7 F - Dommages Intérêts art.1618- 1619 CCQ

Unedited CRA Tags
9(1) 14(5) 125(7) 129(4)
Summary Under
Tax Topics - Income Tax Act - Section 9 - Compensation Payments
Irving Oil applied to find that interest on damages received to compensate for additional costs incurred in a construction business, was business income
Summary Under
Tax Topics - Income Tax Act - Section 129 - Subsection 129(4) - Income or Loss - Paragraph (b) - Subparagraph (b)(ii)
interest on damages received to compensate for a business loss, was business income

Principales Questions:
1 La compensation reçue par le Contribuable sous forme de dommages constitue-t-elle un revenu tiré de son entreprise aux fins de l'article 9 de la Loi ou un paiement de nature capitale?
2) Les intérêts versés avec les dommages constituent-ils un revenu d'entreprise ou un revenu de bien?

Position Adoptée:
1) Un revenu d'entreprise.
2) Un revenu d'entreprise

Raisons:
1) Dû à une erreur d'un fournisseur, le Contribuable a dû encourir, dans le cadre d'un contrat d'entreprise, des coûts additionnels pour démolir et refaire certains travaux lui entraînant une perte économique. Cet événement a donné lieu à un recours de la part du Contribuable qui a réclamé du fournisseur le remboursement des coûts de démolition et de réfection des XXXXXXXXXX . Recours gagné par le Contribuable. Rien n'a démontré que la structure génératrice de bénéfices de l'entreprise du Contribuable a été paralysée ou détruite suite aux coûts engendrés par les travaux de démolition et de réfection.
2) Nous sommes d'avis qu'un parallèle peut être établi entre les faits de la présente situation et ceux décrits dans l'affaire La Reine c. Irving Oil Ltd. La somme reçue au titre de dommages aurait été autrement utilisée dans le cadre de l'entreprise du Contribuable n'eut été le défraiement indu des frais de démolition et de réfection. Cette somme est un bien destiné à être utilisé dans l'entreprise du Contribuable et les revenus d'intérêts y afférents sont des revenus d'entreprise.

26 January 2005 Internal T.I. 2004-0101351I7 F - Déduction pour frais juridiques - Alinéa 60o)

Unedited CRA Tags
60o) 18(1)a)
Summary Under
Tax Topics - Income Tax Act - Section 60 - Paragraph 60(b)
legal fees incurred in disputing sales tax assessments are not included
Summary Under
Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(a) - Income-Producing Purpose
legal costs of disputing GST or sales tax assessments of a business are deductible

Principales Questions: Est-ce que la position énoncée dans le document 2000-0058047 s'applique toujours en considérant la décision dans la cause Sherman, 76 DTC 1170?

Position Adoptée: La position est toujours applicable. L'alinéa 60o) ne s'applique pas à des frais juridiques payés pour se défendre d'une cotisation relative à la taxe de vente.

Raisons: Une cotisation relative à la taxe de vente n'est pas visée dans les cotisations et les décisions décrites aux sous-alinéas 60o)(i) à (iv) de la Loi.

12 June 2002 Internal T.I. 2002-0137817 - Tuition Credits

Also released under document number 2002-01378170.
Unedited CRA Tags
118.5(1)

Principal Issues: whether advanced placement courses qualify for tuition credit

Position: yes

Reasons: 118.5, especially the definition of "tuition" in 118.5(3)
REVIEW: N/A